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Improved sentiment towards global economic growth helped Wall Street to a strong close yesterday, which has had a positive knock-on effect for most European equities this morning. Growth fears eased on Monday following an improvement in certain business climate indicators from the US and China.
China’s manufacturing Purchasing Managers’ Index rose to 50.8 in March, signalling a return to growth and adding weight to officials’ recent declaration that economic momentum remains stable despite visible weakness in February. There is also cautious optimism over China’s trade talks with the US, with Vice Premier Liu He due in Washington this week.
In contrast, there have been reports that the EU’s collective governments are struggling to agree a mandate with which to begin trade talks with Washington. France is expected to object to plans to start negotiating the removal of US-EU industrial tariffs, at a meeting in Brussels on Wednesday.
The frustrations of Brexit, however, have reached another level. Yesterday, MPs failed for the second time to agree on any alternative plan to counter Theresa May’s deal. The cabinet is meeting today to try to decide a way through the bottleneck, but it is, like the House of Commons, deeply divided. It is quite possible that a fourth vote could take place on May’s deal this week, as although it is very unpopular, it is currently without competition.
MPs have control of the Commons again tomorrow, potentially presenting a last chance to manufacture an alternative. In theory, unless parliament passes a deal, the UK will leave the EU unceremoniously next Friday. Chancellor Phillip Hammond has called for his party to compromise, while another Conservative MP resigned last night over the party’s failure to do so thus far.
The British Chamber of Commerce highlighted the effect of such uncertainty on businesses this morning, warning that the number of companies planning to invest in their operations, via physical capital or staff training, has reached its lowest level in eight years.
Finally, ahead of minutes which are due to be released on Thursday, one of the Governing Council members of the ECB commented that future policy will be data-dependent and will remain accommodative for as long as necessary to hit its inflation target.
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